The total market capitalization of companies listed on the two bourses stood at $3.67 trillion, or 280 trillion yen, at the end of September, placing them only behind the New York Stock Exchange.

The two bourses will merge into a holding company, tentatively named Japan Exchange Group Inc.

TSE President Atsushi Saito will become chief executive officer of the holding company and OSE President Michio Yoneda will be its chief operating officer, they said.

“We are confident that this merger will be the cornerstone in reviving Japan’s economy,” Saito said at a joint press conference held in Tokyo.

In the run-up to the merger, privately held TSE will buy OSE shares for 480,000 yen per share through a public tender offer to acquire a 66.6 percent stake in OSE by next summer.

OSE, a publicly traded company, will be the surviving company in the merger at a ratio valuing TSE at around 1.7 times OSE.

The resulting company will be listed on the First Section of the Tokyo Stock Exchange and run four subsidiaries for stock trading, derivatives trading, clearing services and regulatory operations, according to the bourses.

The merger decision comes amid an international reconfiguration of stock exchanges. NYSE Euronext, which owns the New York Stock Exchange, has agreed to merge with Deutsche Boerse AG by the end of this year.

It also comes as the Tokyo and Osaka bourses are engaged in fierce competition with global rivals such as the bourses in China and South Korea.

“Unless we increase (market) liquidity, there will be companies that will head to overseas bourses,” Saito said, adding, “More than just preventing such moves, we intend to attract them.”

The combination of the TSE with its focus on actual shares and the OSE on derivatives will result in “great synergy” with the ability to provide a variety of financial products, cut costs for running systems and enhance global competitiveness, the two bourse operators said.

While the initial news of the bourses’ intention to merge broke in March, nine months elapsed before the two sides formalized an agreement on Tuesday.

On the length of time they required, Yoneda said, “We have a history of operating separately for 133 years, and there was also the difference of being listed and unlisted, but we’ve cleared each step one by one and now we’re at a starting point,” adding they want to speed up the process from now.

The announcement was generally well received by analysts and other key figures in Japan.

“A bourse with a good balance between cash equities and derivatives would emerge,” said Sadakazu Osaki of Nomura Research Institute, calling it a starting point to compete with other Asian and European bourses.

“Listed companies and investors may not see the merits immediately, but in the long run, it would help avoid the risk of bourses stagnating in Japan,” he said. Meanwhile, Chief Cabinet Secretary Osamu Fujimura said the government “welcomes” the planned merger.

“It’s an important challenge for our country’s financial market to try to strengthen its competitiveness through the enhancement of its presence as an international financial center,” he said at a press conference.

Direct Edge, a leading stock exchange in the United States, today announced its intention to launch Direct Edge Brazil, an all-electronic platform for the trading of Brazilian equities. The exchange will be headquartered in Rio de Janeiro with a tentative launch date of the fourth quarter of 2012, pending regulatory approval from the Comissão de Valores Mobiliários.

“The Brazilian economy is among the fastest growing in the world and we believe that a second stock exchange in the country will spur even greater investor participation through competition that drives innovation and price improvement,” said William O’Brien, Chief Executive Officer of Direct Edge. “The exchange will leverage proven Direct Edge technology and architecture that will be customized to the unique needs of the Brazilian market.”

Direct Edge Brazil will operate as an independent, local company majority owned by Direct Edge. A Brazil-based CEO will be appointed to lead a team in Rio de Janeiro to develop Direct Edge Brazil and maintain close working relationships with the Brazilian financial community as well as with local officials and vendors. Direct Edge Brazil, if approved, will be the first stock exchange headquartered in Rio de Janeiro since 2002.

“The arrival of Direct Edge is further proof of the importance of Rio to the global financial markets,” said Eduardo Paes, Mayor of city of Rio de Janeiro. “Having one of the largest stock exchanges in the United States operating here will provide added incentive for other global financial market participants and will likely attract broker services and financial technology firms.”

“Rio has been a global financial hub for years; the financial markets in Brazil started here” said Eduarda La Rocque, Municipal Secretary of Finance, City of Rio de Janeiro. “The decision by Direct Edge to establish its headquarters in Rio reinforces the relevance of the local economy and highlights how the global financial markets realize the plentiful growth opportunities that exist in our city. The pending arrival of a world class stock exchange can create opportunities for Rio’s young professionals, and will boost efforts to revitalize the financial sector in our city.”

Rio Negócios, the investment promotion agency of Rio de Janeiro, worked closely with Direct Edge in supporting the project. “This is a great day for Rio,” said Marcelo Haddad, Executive Director of Rio Negócios. “Direct Edge Brazil will serve as the inspiration to recreate a new and modern financial center in the city.”

Source: Directe Edge, 21.11.2011 For more information on Direct Edge Brazil and to sign up for updates, please go to: www.directedge.com.br

The Mexican Exchange, which is the second largest exchange in Latin America, announced a number of strategic and technology initiatives designed to promote foreign investment in the Mexican financial markets and its position as a Latin American leader in high-frequency trading.

While Brazil continues to be the hottest emerging market in Latin America, the Mexican Exchange (BMV Group), is taking huge steps to boost its growth in the high-speed marketplace.

The Mexican Exchange, which is the second largest exchange in Latin America, announced a number of strategic and technology initiatives designed to promote foreign investment in the Mexican financial markets and its position as a Latin American leader in high-frequency trading.

Mexico now provides worldwide participants with seamless, high-speed and efficient access through low touch direct market access (DMA), high speed co-location services, and FIX standard protocol for order routing and market data Part of Mexico’s success is down to its determination to improve its operative rules to better comply with international market standards, as well as adopting new technology.

In 2012, the Mexican Exchange will announce the launch of a new trading engine, internally developed. This multi-market, multi-asset, flexible and scalable trading engine has throughput of more than 200,000 messages per second. The trading engine will be ultra low latency, executing trades in 100 microseconds roundtrip (improvement over 25 milliseconds on legacy trading system). Full deployment is planned for Q2 2012. Further in 2012, The Mexican Exchange will introduce several new initiatives including midpoint hidden order book trading, aimed at institutional investors looking to trade large blocks anonymously with reduced execution risk. Simpler cross order rules will also be implemented; all stocks, global market equity securities and debt instruments will be crossed within the best bid/ask spread with no intervention. And, VWAP executions for the day will be able to be entered from 8:00 AM CT to 2:40 PM CT.

Phase two of the partnership, “north-to-south,” now in place provides CME Group customers with access to MexDer benchmark products, including Mexican Stock Exchange Index futures, bond futures and MXN Peso / US dollar futures contracts.

Fidessa group plc (LSE: FDSA), provider of high-performance trading, investment management and information solutions for the world’s financial community, has today announced the expansion of its Latin American operations with a new headquarters in the region, new staff and data centers that provide resilient, redundant hosting.

The new office, located in São Paulo, Brazil, will serve as a base for the whole of Latin America and comes about as a direct result of Fidessa’s continued growth there, as well as from the ongoing demand for its products and services from domestic and international firms across the region. As well as cultivating and growing the local business further, the team based in São Paulo will also provide dedicated service and support functions for the regional client base.

The new office is headed by Bryan Miller, Managing Director for Fidessa’s Latin American business, who was previously Senior Vice President and Director of Hosted Client Services for Fidessa in the US. Miller’s background in implementation, project management, and ongoing support for Fidessa’s US clients, positions him well to ensure that the same market-leading levels of delivery and support, for which Fidessa is well known globally, are provided to clients locally as well.

Miller comments: “We are seeing increasing demand for our award-winning investment management, trading, connectivity and market data solutions from many emerging regions around the world. The markets of Latin America, in particular, are growing rapidly and have attracted significant interest from international players looking for opportunities in expanding economies. This is fueling the need for our solutions among both local and international firms looking to trade in the region.”

“Establishing this office is a clear sign of Fidessa’s commitment to the marketplace and we will be building the local team with a mixture of experienced Fidessa people from North America as well as local hires.” Continues Miller, “Latin America is an important strategic step for Fidessa globally, and I look forward to cementing and expanding our presence here to take advantage of the exciting opportunities that it presents.”

Mexican exchange operator Bolsa Mexicana de Valores (BMV) plans to launch a new, as yet unnamed matching engine, which will deliver 100-microsecond message latency compared to the 25-millisecond latency of its current equities platform, and will offer the same performance as Singapore Exchange’s (SGX’s) platform. The engine will also support more than 200,000 messages per second, up from the 9,000 messages per second of its legacy trading system.

BMV CEO Luis Téllez Kuenzler and other exchange officials spoke about these upgrades and the state of the Mexican economy at the second annual Connect & Trade Mexico event this week in New York.

Téllez Kuenzler says the improvements should attract attention from the high-frequency trading (HFT) community, which already makes up 20 percent of trading volume in the country even though HFT in Mexico began only two-and-a-half years ago.

“By successfully improving upon our operative rules to better comply with international market standards, BMV is now better equipped to provide global investors with more efficient trading and connectivity to Mexico,” Téllez Kuenzler adds.

Other functionalities will go live in January, says Jorge Alegria, senior vice president of BMV and CEO of the Mercado Mexicano de Derivados (MexDer) derivatives exchange, which is a BMV affiliate. One of these functionalities is a non-displayed midpoint order book for institutional investors looking to trade large blocks anonymously with reduced execution risk. Old rules regarding crossing trades will also be replaced; all stocks, global market equity securities and debt instruments will be crossed within the best bid/ask spread with no intervention, according to Alegria.

The Mexican exchanges are also considering an invitation from the Mercado Integrado Latinoamericano (MILA)—a trading network among the exchanges of Chile, Peru, and Colombia—to join its network. In the meantime, BMV has signed an order-routing agreement with Chile and is working on another with Brazil’s BM&FBovespa exchange.

“The flow between Mexico and Brazil can be huge,” says Téllez Kuenzler.

SZSE held the celebration for 10-year anniversary of the 4th version of trading system, also for launching the construction of the 5th version of trading system.

The 4th version of trading system, officially launched on November 12, 2001, was independently researched and developed by SZSE, which, adhering to the fundamental principal of “secure, efficient and self-controllable”, constantly expands and improves the function and performance of the system in light of the needs for constructing China’s multi-layer capital market. In the past 10 years, the 4th version of trading system has witnessed the establishment of split share structure reform, SME Board, ChiNext, and Zhongguancun Park Enterprises Stock Quotation System, and other major business innovation including ETFs, LOFs, margin trading securities lending in the process of rapid development of Shenzhen securities. It plays a significant role as technology support to guarantee the safe and stable market operation and push forward the construction of multi-layer capital market. By far, the 4th version of trading system has provided trading services for as many as 1800 securities, 4700 sales networks and 100 million investors, with the actual peak amount of daily entrusted deals handled as high as 22.47 million, and a 10-year record for continuously safe operation.

As multi-layer capital market continuously develop healthily in China, SZSE, on the basis of ongoing plan, now officially implement constructing new version of transaction system, namely the 5th version of transaction system, so as to support the future business development, provide better market transaction services, and reinforce market competitiveness. The prospective 5th version of trading system aims at, on the one hand, building a scientific and sound structure with higher efficiency, larger capacity, better security, more expansibility and more flexible business adaptation, on the other hand constructing an integrated transaction platform capable of supporting multi-layer, multi-variety, multi-market. It is expected to be launched in 2015, by the time of which the new system’s speed of handling orders will reach more than 200 thousand deals per second.

Chen Dongzheng, Chairman of SZSE Council, and concurrently Secretary of SZSE Party Committee attended the ceremony and announced the official launch of the research and development for the 5th trading system.

Finamex, a full-service independent broker dealer from Mexico City, and leading provider of innovative trading solutions, has released four opportunistic market trending algorithms for use by Direct Market Access (DMA) clients. The main idea is to allow clients to effectively gain arbitrage profits while mitigating collocation and/or their own strategy development costs.

Finamex’s latest release of arbitrage algorithms have been designed to build opportunities on fungible domestic equities displayed in the Mexican exchange marketplace. Execution calculations work through pre-programmed algorithms built on leveraging theoretical quote pricing as the primary driver of behavior, speed and momentum.

There are a variety of features to how the Finamex arbitrage algorithms provide opportunities with US equities in the Mexican market:

1. Hunter – is an algo which seeks to take advantage of sudden inefficiencies between the equities of foreign listed symbols in Mexico versus their originating market (such as the QQQ or AAPL on the Nasdaq or NYSE markets). The Hunter algorithm computes required data-sets and adjusts itself independently within defined price spreads on the Mexican Stock Exchange (Bolsa Mexicana de Valores: BMV).

2. Ghost – has a characteristic of lying dormant until a desired buy/sell signal appears with a non-previously indicated ask/bid price then it executes contrarily. Similarly with the Finamex “Hunter” algo, Ghost receives the side, quantity and spread parameters of opposing bids/offers satisfying spread parameters of its local market yet quickly hitting IOC type status. This feature helps in the recognition of desired price opportunities without revealing trade strategy intentions by its clients.

3. Scaled – uses a two-spread metric like the Hunter algo, with a signal that triggers in a suddenly inefficient environment. The Scaled algo strategy is seen on a big spread definition, called a “base.” Scaled reacts instantaneously when a lower spread, called the “target”, is satisfied on the other side. Unlike the Finamex “Ghost” algo, the Scaled algo’s intentions are exposed but move immediately when the target spread is satisfied. The Scaled strategy allows other market participants to preview this algo’s activity, causing them to sometimes take a glance on the board, which in turn drive executions over the spreads.

4. Market-maker – a next generation algo intended to provide liquidity and act as a market maker within the local Mexican marketplace. Market-maker absorbs the last trade, adds an indicated spread and automatically places or replaces the order with an indicated quantity. In combination with pegging and short-sell models, the Marketmaker algo is highly beneficial for market making strategies and for acting on market divergences.

“We’re putting in place all of these free strategies for clients who want to access the Mexican stock market with an almost-zero setup price. Our goal is to take Mexico to a higher level in the emerging markets priority list of global investors,” states Hector Casavantes, head of Electronic Trading at Finamex. “We wanted to offer automated algo strategies in order to let investors know how active and easy this market can be to trade. All algorithms were architected with profitability in mind. They’re highly customizable, completely auditable and comprehensive, fully meeting our clients’ demands”.

“With the addition of these tools, we’ve further enhanced our suite of algorithmic-trading products beyond our well-known execution algos in VWAPs, TWAPs, Implementation Shortfall and POV, “Roberto Larenas, Head of Equity Markets at Finamex added. “While we are aware that these algos are more opportunistic, we are still keeping our business model as pure-agency. Buy-side firms are increasingly requesting new tools, new ideas, and new ways to exploit opportunities in emerging markets. Finamex is fully committed in addressing these demands with our best-of-the breed solutions

London Stock Exchange Group (‘the Group’) today announced that MillenniumIT, a wholly owned subsidiary, has signed a contract with the Delhi Stock Exchange (‘DSE’) to provide the Indian Exchange with trading technology. The deal will see MillenniumIT provide solutions for equity, derivatives and FX trading as well as clearing technology.

Tony Weeresinghe, CEO of MillenniumIT and Director of Global Development at London Stock Exchange Group said:”We are delighted to have been chosen to provide trading and clearing technology solutions to the Delhi Stock Exchange. India is a dynamic and fast developing market and we look forward to working with the Delhi Stock Exchange to introduce a high-speed, low-cost trading solution to the Indian market.” A time table for implementation will be announced in due course.

In the last 12 months dramatic changes have occurred at Mexico’s stock exchange and among its brokerage clients. Cross border partnerships, technology upgrades, new FIX infrastructure and business friendly regulatory changes have opened the Mexican market to high frequency trading (HFT).

While US regulators can be seen to scold HFT firms, the Mexican market has opened its arms. The Mexican Exchange (BMV) and its brokerage firms have upgraded their infrastructure and sought business opportunities north of the border. Earlier this year after the CME Group and the BMV signed their partnership, high frequency traders on the CME Globex trading system began to route orders to the Mexican Derivatives Exchange or MexDer. Today 90 percent of average daily volume on the MexDer comes from high frequency traders north of the border.

Mexico’s brokerage firms have completed significant infrastructure upgrades. Last spring only a few brokers in Mexico could handle a highfrequency hedge fund client and many Mexican brokers could process no more than one connection to the Bolsa Mexicana de Valores (BMV) at a time. The landscape has changed quickly and improvements in broker and exchange systems have ushered in a new capacity for speed in the transmission and execution of orders in Mexico.

Over the summer a major milestone occurred for the industry. Working with the BMV, Mexico’s brokers completed an industry-wide upgrade to FIX 4.4. The top 25 brokers are now certified with FIX 4.4 to the BMV. Leading the way, are brokerages like GBM, Interacciones, Actinver, UBS Mexico, IXE and others.

Now that Mexican brokers speak FIX 4.4, all of the order routing to the BMV can now be done through FIX allowing the BMV to retire the antiquated SETRIB protocol. The only way the BMV will allow Mexican brokers to continue to use SETRIB is by paying excessive fees, and even this will not be allowed by the end of 2011. Retiring SETRIB sets the stage for more positive changes in the industry and at the BMV.

Work is already underway to upgrade the BMV’s trade matching engine. The existing engine was built in the 1990s for a Tandem mainframe. Retiring the Tandem has many benefits. Faster order matching and processing is high on the list. In addition, more choices for application and software vendors and significant cost savings are expected. Retiring the mainframe will also eliminate the scheduling nightmares associated with the limited availability of the central mainframe for testing with the broker community. The new matching engine will be hosted on modern Unix based hardware. The release of the new matching engine and infrastructure is planned for the first quarter of 2012.

Another important milestone is the availability of a state-of-the-art co-location facility at KIO Santa Fe. The BMV infrastructure is located here and starting in October it will be easy for brokers and third party providers to collocate order routing and market data in this hosting facility leading to high throughput low latency services.

While all of the infrastructure and matching engine upgrades are momentous, they would bear no fruit without the simultaneous modernization of Mexican regulations. The initiative to modernize Mexico’s regulations, called RINO, began a year ago and phase two is due to rollout in the fall of 2011. The goal of RINO is to conform Mexican regulations to international standards. By converging with international standards, regulators hope to bring more international order flow and greater liquidity to the market, resulting in increased investment in the Mexican market.

While regulations in the US like Sarbanes Oxley and Dodd-Frank can be seen to drive businesses offshore, the regulatory changes in Mexico are removing handcuffs from businesses and facilitating opportunities. The first step forward occurred early this year with RINO I. RINO I allowed brokers to have multiple channels to the BMV’s electronic trading system. Previously all orders were in a single queue. Multiple access points per broker provides more flexibility in executing strategies and handling client requests, including separate BMV channels for program trading and orders called into the trading desk. RINO I also eliminated sizebased criteria from order management, thus leveling the playing field in the processing of orders. RINO II takes effect on October 10, 2011, bringing more modernizations including pegged orders, improvements in crossing operations, average price operations, price delivery regardless of volume, and decimal bids for fixed income securities.

Crosses, in which a brokerage carries out a transaction through the stock exchange between two of its clients, were permitted previously but the rules were very arcane. Starting in October, the crossing operations will be vastly simplified allowing clients to simply choose whether to cross inside or outside the spread. With this modernization, the BMV hopes to repatriate orders that brokers would previously carry out in the US, where crossing orders was possible using ADRs in dark pools or at the NYSE.

In addition the RINO II regulations a very important new mid-point hidden book order. The orders execute at the midpoint, broker anonymity is guaranteed and the order priority is determined by volume. This is effectively a dark pool. Similar to Xetra, this new BMV order helps the market participants and simultaneously protects the BMV from providers toying with moving into the Mexican marketplace.

As the regulations modernize and the FIX infrastructure hardens, opportunity beckons. Brokers are beginning to push for more high frequency trading algorithms, more efficient routing of international orders, and more sophisticated risk controls, all of which will attract even more international business. As the need for speed grows, co-location previously offered by the exchange may become more strategic, particularly to brokers wanting to attract high frequency traders.

All of this progress was made possible in large part because of the exchange’s demutualization and subsequent listing in 2008. The demutualization coincided with rule changes allowing Mexico’s pension funds or AFORES to invest. Before the rule changes, the AFORES were forced to invest almost entirely in short-term government paper. Today, Mexico’s pension funds are allowed to invest up to 25 percent, in individual stocks and shares and 12 percent in a hybrid of corporate debt and equity capital to allow companies to raise funds to expand businesses.

Considered together, regulatory improvements and infrastructure updates have morphed the BMV and the Mexican brokerage community into a thriving and modern marketplace. The BMV reported a 22 percent jump in earnings last year, with operating income increasing 70 percent in the last three months. A record six initial public offerings made it to market last year and overall trading volumes rose 50 percent in 2010. This year Mexico’s IPC index has tested and hovered near record highs.

In 2011 there are fewer IPOs, but trading volume remains strong. The order-routing agreement signed with Chicago’s CME Group has opened Mexico’s derivatives market to the world. Now, electronic trading infrastructure and investor friendly regulations have set the stage for act two.

Latin America has enjoyed a strong recovery for the most part it has sailed through the recession without lasting damage. Boosted by capital inflows, by record prices for commodity exports, by sound policies and by a heady expansion in domestic credit, the region saw economic growth of 6% last year and is on course to notch close to 5% this year. The region faces slower growth but not disaster. To up the pace, now is the time for reforms to boost productivity.

The main engines for growth in Latin America are China’s demand for minerals, food stuffs and raw materials – this looks set to continue – and consumption as tens of millions edge out of poverty and benefit from newly available credit.

Dr. Bai Shuo of the Shanghai Stock Exchange (SSE) explains the importance of the STEP Protocol and its development in China.

How did the STEP Protocol begin and which organisations originally developed it?

Back in 2003, at the same time when the SSE began to prepare the Next Generation Trading System (NGTS) project, which would later go live on Nov 23, 2009, the SSE decided to introduce a message-based protocol between the exchange and brokers, which is widely accepted to be FIX. The pioneering work was encouraged by the China Securities Regulatory Commission (CSRC).

Under the framework of national standardization, this protocol became one of the eight standards in the securities industry. The WG01 group was responsible for the drafting of the protocol under the direction of the CSRC. The membership of the WG01 group includes: SSE, Shenzhen Stock Exchange (SZSE), Shanghai Futures Exchange (SHFE), Guoxin Security Co. and some other securities companies. The protocol, which is informally called Chinese FIX, or CFIX, is named STEP (Securities Trading Exchange Protocol), as it is regarded as the initial ‘step’ towards a first-class stock market. STEP 1.0 was written in 2004 and issued in 2005. STEP was revised as version 1.1 in 2006.

How does STEP fit into China’s overall usage of standards in the financial world?

While FIX is a global standard in the securities industry, STEP is more suitable for the Chinese market, since STEP introduced many native business and local definitions. The CSRC is responsible for the STEP standard. The SSE has agreed to use STEP and is eager to promote STEP, so as to encourage brokers to follow STEP. In China, investor accounts that should be supervised are designed to be contained in Parties component block. Tags in range 8500 to 8540 are allocated for Chinese market usage, such as market data delivery and business for funds, warrants and voting. Quite a few tags are enhanced for local businesses, such as tag 40 (OrdType), tag 103 (OrdRejReason), tag 269 (MDEntryType), tag 326 (SecurityTradingStatus).

What is the scope of STEP’s usage? What parts of the trading cycle was it intended to cover and what asset classes is it used for?

STEP covers the pre-trade and trade parts of trading cycle, as well as some specific registering instructions. STEP is used for stocks, funds, bonds, warrants, ETFs, and lots of featured non-trading businesses, such as IPOs, right issuances, fund creation and redemptions, warrant executions, bond deposit and withdrawals, voting, etc.

Who were the early adopters of STEP? Who currently uses STEP and for what?

The SSE uses STEP for level2 market data service. Information vendors have taken STEP for level2 service in the meantime. Creative businesses like this are suitable to take the new protocol standard in order to have the ability to easily maintain and extend, without a burden to support a legacy interface.

What is the next stage in the development of STEP? Where is adoption of STEP going to grow most significantly in the near future? Are there new goals or applications for STEP?

STEP is under revision as many new businesses were introduced during the last five years. STEP is considered easier to be adopted in market data and other creative businesses. Also, STEP over FAST will be used for SSE level 1 market data delivery. Block trading, quote repo, agreed repo and margin financing on the Alternative Trading Platform (ATP) of the SSE will take STEP as the format for business records. Traditional trading business will gradually be enhanced to support STEP in near future as we get more confidence through the experience on creative business.

The 2nd China-Brazil Capital Markets Forum, jointly sponsored by the Shanghai Stock Exchange (SSE) and BM&F BOVESPA, was held on 27 October in Shanghai. SSE President Zhang Yujun said that the SSE would cement all-round cooperation in the capital markets of both sides with BM&F BOVESPA.

Marcos Caramuru, Ambassador of the Consulate General of Brazil in Shanghai, and Edemir Pinto, CEO of BM&F BOVESPA attended the forum presided over by Zhou Qinye, SSE Chief Accountant.

This February, Zhang Yujun, SSE Vice President Xu Ming and their entourage participated in the 1st China-Brazil Capital Markets Forum held in Brazil and signed a memorandum on closer cooperation with BM&F BOVESPA. Both sides fixed upon negotiation to hold the 2nd China-Brazil Capital Markets Forum in China in late October, 2011.

At the forum held in Shanghai, both sides compared notes on the intensification of cooperation and exchanges in China-Brazil Capital Markets and the in-depth development of the exchanges in the two countries under the new backdrop. Besides, special sub-forums were held to respectively discuss the opportunities for and internationalization of enterprises in emerging markets, the challenges and opportunities of emerging markets for investment in multinational capital markets and the practices and experience in the investor education and protection.

According to the cooperation memorandum signed previously, both sides reached an intent of cooperating in information, exchange, product development, trading platform construction, mutual personnel dispatch. Besides, both sides had common views on the periodical visit mechanism of senior managers as well as the exchanges in bond, fund, information, technology, investor education, academic science and personnel dispatch.

Zhang Yujun said at the forum that with the rapid growth of Chinese economy in recent years, the two countries had seen a good trend of economic cooperation. In the South America, China had become the biggest source of capital flowed as FDI into Brazil. All this would require the domestic financial industry, especially all the participants in the capital market, to provide better financial services and supporting services for further opening-up of the Chinese economy. The cooperation between the SSE and BM&F BOVESPA should be cemented in response to the new trends of the economic growth and capital market development in the two countries.

Finally, Zhang said that after the 1st China-Brazil Capital Markets Forum, more and more exchanges in the domestic capital market strengthened the cooperation with all the participants in the Brazilian capital market. For instance, a participant in the Brazilian capital market directly invested in the IPO of CITIC Securities in Hongkong. In the future, more domestic securities companies and fund management companies will provide financial services for Chinese enterprises’ investment in foreign capital markets.

The NASDAQ OMX Group and Bolsa Electronica de Chile (BEC) today signed a strategic alliance which will provide BEC with the NASDAQ OMX market technology, exchange trading, and advisory services for product development and global visibility.

BEC and its members will benefit from significant enhancements in performance, latency and throughput capacity by shifting to NASDAQ OMX’s proven exchange technology. BEC members will remain connected via the FIX trading protocol for a seamless system shift. NASDAQ OMX market technology is used by over 70 exchanges in 50 countries.

Through the strategic alliance, NASDAQ OMX will advise BEC on their efforts to cross-list shares, develop new indices, improve existing indices and begin a case study to create peso-dollar futures for trading on NASDAQ OMX exchanges. Also, NASDAQ OMX will provide global visibility resources for promotion and marketing.

Fernando Canas, President of BEC, said: “NASDAQ OMX market technology will open the doors to achieve real interconnection for investors who wish to enter the Chilean marketplace and the advisory services will help us create new instruments for investors around the world.

“Our alliance with NASDAQ OMX will support areas of BEC strategic development like technology implementation and partnerships for new products.”

Launch of the first stage of the BM&FBOVESPA PUMATrading System

BM&FBOVESPA announces the conclusion of the first stage of development and integrated tests with the market of its new trading platform, named the BM&FBOVESPA PUMA Trading System. This is a multi-asset electronic trading platform that has been developed by BM&FBOVESPA and CME Group. BM&FBOVESPA PUMA Trading System will replace the Global Trading System (GTS), Mega Bolsa, BOVESPA FIX and SISBEX, integrating them into a single system with greater processing capacity, extremely low latency, and new functions. The implementation will occur in stages:

The Exchange implemented the BM&FBOVESPA PUMA Trading System in the spot foreign exchange market on August 29, 2011. The other stages will be executed in the following weeks, at dates to be announced at an opportune moment. As part of the GTS replacement effort, instruments will migratein four-stages. At each stage, orders sent to the Exchange for these contracts will be processed exclusively by the new system. The migration stages are:

BM&FBOVESPA and BOVESPA Market Supervision (BSM), the Brazilian self-regulatory organization in charge of inspecting and supervising transactions and trade authorizations, announced on September 15 that they will use NASDAQ OMX’s SMARTS Integrity market surveillance platform to monitor trading across their equities and commodities platforms. Using SMARTS Integrity, BM&FBOVESPA and BSM will have a comprehensive portfolio of alert scenarios for market behavior.

BM&FBOVESPA and BNDES present new portfolio for the Carbon Efficient Index

BM&FBOVESPA and BNDES announced on September 5 the composition of the theoretical portfolio of the Carbon Efficient Index, valid from September to December 2011. The ICO2 is an index composed of stocks in IBrX-50 index companies that have accepted involvement in the initiative, adopting transparent practices as regards greenhouse gas emissions (GGEs). The calculation of shares in the ICO2 index takes into consideration the greenhouse gas emissions and free float of companies.

New head of BM&FBOVESPA for UK

BM&FBOVESPA announces that Sergio Gullo has been hired as the new chief representative for BM&FBOVESPA in London. He will report to BM&FBOVESPA International Business Development Officer Lucy Pamboukdjian and be responsible for operations with the European, Middle Eastern and African markets. Sergio Gullo has been active in the financial market for more than 27 years. He was Business Development Manager in the United Kingdom for BGC Partners and has worked in financial institutions such as Banco Votorantim and Renaissance Capital, specializing in emerging markets and always in commercial areas with a focus on fixed income and structured products. He also held a wide range of positions at Lloyd’s TSB Bank for 19 years, in both Brazil and the UK.

New office in London

The BM&FBOVESPA office in London has moved to One New Change, 4th floor (London, EC4M, 9AF, United Kingdom). The London office may be contacted by e-mail at sgullo@bvmf.com.br and by telephone at (+44) 203 379 3978.

BM&FBOVESPA (BVMF) and the Shenzhen Stock Exchange (SZSE) signed on September 26 a memorandum of understanding (MOU) which includes personnel exchange, mutual training and information and experience sharing. Ms Song Liping, President of the Shenzhen Stock Exchange, and Mr. Edemir Pinto, CEO of BM&FBOVESPA, signed the MOU last month during the 5th International, Financial and Capital Market Conference in Campos do Jordão, in the state of São Paulo.

BM&FBOVESPA’s options and capital raising activity

According to the WFE (World Federation of Exchanges), BM&FBOVESPA is ranked as #1 in volume of Stock Options contracts trades and #4 in IPOs (Capital Raised). These and other regulated exchange industry numbers are available at: http://www.world-exchanges.org/statistics

Securities Lending

In August, the total number of securities lending transactions reached a record 141,721 compared to the previous record of 121,971 in May 2011 and to 114,989 in July. Financial volume was BRL 62.63 billion in August from BRL 52.16 billion the previous month.

Ibovespa and other index portfolios, valid for September-December 2011

BM&FBOVESPA has announced the Ibovespa theoretical index portfolio, which will be valid from September 5 to December 29, 2011, based on the closing of the September 2, 2011 trading session. The new portfolio now includes common shares in BR Malls and Cia Hering, which brings its total to 68 stocks in 63 companies.

BM&FBOVESPA launches app for Google Chrome web browser

BM&FBOVESPA announced on September, 16th that users of the Google Chrome web browser can download a free app that allows real time monitoring of the share prices of companies traded on BM&FBOVESPA and of the directions taken by the main capital market indexes. This tool allows users to customize their share portfolio, storing in the “Favorites” tab the companies that they wish to monitor daily. The app includes films that explain stock investment, wealth creation, and financial education. It also contains messages that are sent to the BM&FBOVESPA twitter channel @Info_BMFBOVESPA

2011 EVENTS

Family Office Summit – Latin America

BM&FBOVESPA is currently sending invitations for this event promoted by the World Research Group and which will be held in São Paulo September 26-28. A BM&FBOVESPA representative is scheduled to talk about alternative investments. The summit will present current trends for optimizing effective strategies and alternative methods to produce investments for single and multi family offices in the Brazilian capital market. There will be a special networking session bringing together managers, single and multi family offices, advisors and consultants.

2nd FX Growth Markets Series: Brazil – Profit & Loss

BM&FBOVESPA will join the Profit & Loss FX Growth Markets conference on October 20, 2011 at the Tivoli Hotel in São Paulo. Profit & Loss has been operating its highly successful series of Forex Network and FX Growth Markets conferences for more than 10 years, with regular annual events held in London, New York, Chicago, Singapore, Brazil, Mexico, Colombia, Chile, Shanghai and Toronto, and comes to Brazil for the second time. A BM&FBOVESPA representative will talk at the event.

The World Cup of ETFs and Indexing Latin America

BM&FBOVESPA is lending its support to the World Research Group’s “World Cup of ETFs and Indexing Latin America.” The event aims at providing attendees with the best practices for ETFs use, as well as a comprehensive analysis of market structure, regulations and current and future opportunities. The expected audience includes pension funds, hedge fund managers and investors, investment advisors, financial consultants, and other market participants. A BM&FBOVESPA representative will talk about the Exchange’s ETF products.

In August, transactions carried out by foreign investors presented by CME to BVMF (who use the Globex-GTS order routing system or access BVMF markets via co-location) totaled 5,308,308 contracts traded, in 1,235,349 trades, compared to 2,897,744 contracts and 688,862 trades in July.

* Direct access to the BM&FBOVESPA market segments is carried out through DMA models 1, 2, 3 and 4. In model 1 or traditional DMA, the client accesses the GTS or Mega Bolsa through technological intermediation of a brokerage house. In model 2 or via DMA provider, the client does not use the technological intermediation of a brokerage house, but rather connects to the system through an authorized access provider. DMA via order routing with CME Globex is also a form of DMA model 2. In model 3, the client connects to the system through a direct connection. In model 4 or via co-location, the client installs its own computer within the Exchange’s facilities.

Notes:

The volumes registered by access modality include both buy and sell sides of a trade.

The volumes by access modality for both the BM&F and the BOVESPA market segments have been reported in a consolidated manner in the BM&FBOVESPA statements since May 2009.

MARKET RESULTS

BM&F Segment August 2011

Derivatives markets in the BM&F segment (including financial and commodities derivatives) totaled 78,606,873 contracts and BRL 5.23 trillion in volume in August, compared to 44,199,125 contracts and BRL 3.35 trillion in July. The daily average of contracts traded in the derivatives markets in August was 3,417,690, in contrast to 2,104,720 in July. Open interest contracts ended the last trading day of August with 37,821,302 positions, compared to 30,716,596 in July.

BOVESPA Segment August 2011

In August 2011, the equity markets (BOVESPA segment) financial volume totaled a record BRL 177.906 billion, in a record 16,234,673 trades, with daily averages of BRL 7.73 billion and a record 705,855 trades. This was in comparison to the prior total volume record of BRL 155.55 billion in October 2010, the prior total trades record of 11,172,707 in May 2011 and the prior daily average trades record of 544,88 in February 2011.

Investment Technology Group, Inc. (NYSE: ITG), a leading agency research broker and financial technology firm, today announced the launch of algorithms for Mexican equities, including the proprietary Active algorithm, which has been customized for the structure and spread profile of the Mexican market. The algorithms are available via ITG’s award-winning Execution Management System, Triton®, as well as other widely used trading platforms and via FIX connection.

“Regulatory and technological changes are accelerating the move towards electronic trading in Mexico, and our tailored algorithms provide a valuable new tool for institutional asset managers seeking to access that market,” said Jeff Bacidore, Managing Director and Head of Algorithms at ITG. “These algorithms are designed to reduce market impact, maximize execution quality and improve trading performance in the Mexican equity market.”

The Mexican algorithms complement ITG’s growing Latin American trading capabilities. ITG offers a full suite of algorithms for Brazilian equities, including Active, Flexible Participation, Volume Participation and the recently added Peg & Pounce algorithm. Peg & Pounce empowers traders to take liquidity opportunistically when the size is available and supply liquidity passively when liquidity is not available.

Raj Mahajan, president of SunGard’s global trading business, said: “The economy in Latin America continues to grow at an exceptional pace. Led by Brazil, which has achieved an annual average growth of 3.7% over the last ten years, (nearly twice that of the US), the boom includes Mexico, Chile, Columbia and Peru. SunGard is helping Latin American trading firms capitalize on the change and growth in that region, by providing low latency execution to help them compete in the global race for liquidity with greater transparency, efficiency and access to network connectivity.”

The ten trends SunGard has identified as shaping Latin American trading are:

2. Brazil’s markets are going completely electronic, increasing firms’ ability to more efficiently and more quickly access liquidity. As a result volumes have skyrocketed; a 400% increase in activity in the last decade.

3. Demand for international order flow is high as volumes are rising in emerging markets: Brazil is ranked the fourth largest emerging market according to a recent article.

4. The sell-side in Latin America is consolidating; large international players are buying local brokers to quickly increase their presence and credibility.

5. FIX connectivity is increasing: As firms receive and execute more order flow internationally, the adoption of FIX has taken hold in Latin America, helping to efficiently connect buy- and sell-side firms.

6. Trading volumes are increasing across the region and firms need real-time data and analytical tools for greater transparency into market movements. It is predicted that Brazil will see a 4.9% increase in equity market performance in 2011, according to a recent report. From 2006-2010, fund flows into Brazil have totaled $10 billion.

7. As more international investors want exposure to LatAm markets, the networks into and out of these markets becomes more important. Local firms and international players are investing in telecommunications infrastructure to ensure bandwidth and reliability for their trading networks.

8. With major exchanges allowing third party software firms direct access to exchanges, traders have more network connectivity options and can now take advantage of independent software vendors to provide their technology platforms.

9. As LatAm trading volumes skyrocket, the demand for financial information within the region is growing. In terms of financial market data and news, Latin America is second only to the Asian nations in allocating more budget for this resource.

Danielle Tierney, junior analyst at Aite, said, “Networks are the key to sustaining growth in Latin America. Approximately 25 percent of the volume traded in Latin America is international, driving the search for new sources of liquidity and establishing connections to powerful global networks.”